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alephnull on 31 December 2009
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Squilliam said:
alephnull said:

My point in asking about revenue is that it gives us a hint at what demand might be, and that it is relatively independent of cost. When I had to help do a analysis of the Virtalization market for a budget proposal we didn't look at unit sales for ESX. I didn't make this up to troll nintendo. And quite frankly I haven't made up my mind about anything Squilliam said yet.

I think Squilliam will vouch for me when I say that it'll be a cold day in hell when I start trolling on MS's behalf. I honestly think they may have the largest share of the market, in a strategically more important sense than maket share as measure by unit sales.

In an absolute sense revenue does not fully tell us what the demand of a console is because a console manufacturer can be quite aggressive with price cuts to increase overall unit sales whilst overall revenue falls. Now if revenue is falling but unit sales are increasing then you see theres not such a clear correlation between the two, let alone causeation. For example the Iphone probably has the highest demand in the smart-phone industry at the moment but it certainly doesn't have the highest revenue, but it does have the highest profit margin. We can see the level of demand relative to the competition with that metric. When two consoles are similar and the price of one effects the demand for the other the overall demand for that console is limited by the actions of the other console manufacturer.

 

I'm not quite following what you are trying to say about "correlation" between demand and revenue. Remember demand is a function (infinite-dimensional vector) and revenue is a scalar (1-d vector). You can't talk about correlation between the two. Maybe you mean a function of? But this doesn't make sense either as revenue is (quantity demanded at a given price Qp)*price.

If the Iphone was exactly the same, but the cost to manufacter was doubled the demand curve, in theory should remain completely unchanged -- this assumes people don't want things more just because they are expensive, which is demonstrably false. If apple chose not to adjust the price accordingly they might or might not make a loss, but the point is that has nothing to do with demand.

I realize that prices of substitution goods effect each other's demand curves, I'm not sure what your point is.